Doctrine Of Equitable Mootness Explained (In re Boy Scouts)

The recent Boy Scouts opinion from the U.S. Court of Appeals for the Third Circuit (decided May 13, 2025) provides this Q & A illumination on the doctrine of equitable mootness:

Question: Does the doctrine of equitable mootness preclude the requested relief on appeal?

Answer: In light of the limited relief Appellants seek:

the success of their appeals does not threaten to fatally scramble the Plan; and
thus, equitable mootness does not prevent us from reaching the merits of their claims.

What follows is an attempt at summarizing the doctrine of equitable mootness, as explained by the Third Circuit Court of Appeals in its Boy Scouts opinion.

Equitable Mootness

Equitable mootness is a “judgemade abstention doctrine” that permits a federal court to dismiss and decline to consider the merits of a bankruptcy appeal, after the consummation of a plan:

when effective relief could conceivably be fashioned; but
implementation of that relief would be inequitable.

Here are some guiding principles for the equitable mootness doctrine:

it is invoked when the requested relief will produce a perverse outcome, like significant injury to third parties or chaos from a plan in tatters;
it is an application of the age-old principle that, in formulating equitable relief, a court must consider the effects of the relief on innocent third parties; and
it provides a rare exception to the rule that federal appellate courts have a “virtually unflagging obligation” to exercise the appellate jurisdiction conferred on them.

–Critics

The equitable mootness doctrine has its critics (see, e.g., In re One2One Commc’ns, 805 F.3d at 438–54 (3d Cir. 2015) (Krause, J., concurring); In re City of Detroit, 838 F.3d 792, 805–814 (6th Cir. 2016) (Moore, J., dissenting). That’s because:

Congress took great care to define the circumstances where appellate remedies are unavailable (see 11 U.S.C. §§ 363(m), 364(e)); and
the Supreme Court counsels against importing limits on appellate remedies to sections in which they do not appear.

–Defenders

The Third Circuit Court of Appeals has defended the validity of the equitable mootness doctrine. And the U.S. Supreme Court has yet to consider the doctrine—but not for lack of opportunity (see the opinion’s footnote 20 for a list of such opportunities).

And so, equitable mootness remains the law of the Third Circuit.

At oral argument, appellants urged the Third Circuit to overrule its prior cases that adopt equitable mootness. But absent en banc review, we cannot revisit our equitable mootness precedent and are bound to apply that precedent.

Here are some general principles of the equitable mootness doctrine that the Third Circuit recognizes:

the doctrine is “limited in scope” and must be “cautiously applied”;
the doctrine is only available in complex bankruptcies where the reorganization involves intricate transactions; and
in the very few cases where the doctrine applies, courts deploy it with a scalpel rather than an axe.

Two-Pronged Test

The Third Circuit criteria for invoking the equitable mootness doctrine have shifted over time. But as we encounter it today, the inquiry has two prongs:

first, we ask whether a confirmed plan has been substantially consummated; and
if it has, we consider whether granting the relief requested in the appeal will, (a) fatally scramble the plan, and/or (b) significantly harm third parties who have justifiably relied on plan confirmation;

Within those two prongs, the party seeking dismissal of an appeal on equitable mootness grounds bears the heavy burden of proving its applicability based on an evidentiary record, not on speculation: bare assertions of inequity and “Chicken Little” statements do not suffice.

Here’s how we apply the two-pronged test to the evidentiary record here.

First Prong: Substantial Consummation

We determine “substantial consummation” under the three criteria in § 1101(2) (emphasis added):

(i) transfer of all or substantially all of the property proposed by the plan to be transferred; (ii) assumption by the debtor or by the successor to the debtor under the plan of the business or of the management of all or substantially all of the property dealt with by the plan; and (iii) commencement of distribution under the plan.

Under these three criteria, substantial consummation is shown.

–Transfer.

The first element of substantial consummation (i.e., transfer) is established:

Debtors have contributed their $80 million promissory note and their $42.8 million loan proceeds from the National Boy Scout Foundation and have assigned insurance rights, interests in artwork valued at $59 million, and oil and gas interests valued at $7.6 million;
Settling Insurers have made all their contributions under the Plan, paying $200 million and placing $1.4 billion into escrow;
Local Councils have provided $439 million of their required $500 million, a promissory note for up to $121 million and insurance rights, and they have already sold one-third of the 96 real properties to be sold;
other entities have contributed $2 million of their required $30 million and have collected the remaining $28 million; and
the deposits, totaling $1.4661 billion, represent 90% of the total required contribution.

That is enough to establish the transfer element of substantial contribution.

Appellants argue that funds held in escrow are only a conditional transfer, which “defeats the notion that there has been a ‘completed’ transfer.” The problem with such an argument is that neither § 101(54) nor § 1101(2)(A) requires that a transfer be completed or that funds reach their ultimate destination.

–Assumption.

The second criterion for substantial consummation requires the “assumption by the debtor or by the successor to the debtor under the plan of the business or of the management of all or substantially all of the property dealt with by the plan.”

Two requirements exist for this criterion:

there must be “assumption by” either (1) the debtor, or (2) the successor to the debtor; and
debtor or its successor must have assumed (1) the business, or (2) management of all or substantially all of the property dealt with by the plan.

Debtors have satisfied this assumption condition by:

operating as a recognized charitable non-profit since emergence from bankruptcy in April 2023;
fully resuming operations, including receiving charitable donations, implementing the robust supplemental youth protection measures outlined in the Plan, implementing new bylaws and rules and regulations, and electing new board members; and
assuming control of the scouting program.

–Distribution.

The third criterion for substantial consummation requires “commencement of distribution under the plan.”

This criterion simply requires that distributions have begun.

In this Boy Scouts case, settlement payments to abuse claimants have begun. As of April 22, 2025:

5,552 abuse claimants elected an Expedited Distribution, resulting in $18.3 million in distributions being made under that election alone; and
12,807 claimants received distributions under the Claims Matrix election in amount totaling $107.4 million.

So, distributions under the Plan have begun.

Second Prong: Scrambling the Plan and Justified Reliance

On this second prong, we assess whether granting the requested relief will, (a) fatally scramble the plan, and/or (b) significantly harm third parties who have justifiably relied on plan confirmation.

On the record before us, appellees have not demonstrated that the limited relief sought by certain appellants would imperil the Plan’s success. That’s because those appellants ask for narrow, cabined relief.

These appellants ask for minor modifications to three provisions of the Plan to ensure that they retain their rights and defenses under their assigned insurance policies:

we can hardly say that these minor changes—none of which disrupts the funding or the bargain struck or requires clawing back distributions—meets the high threshold of “knocking the props out from under” the Plan; and
so, we decline to dismiss these appeals as equitably moot and will proceed to consider the merits of the limited claims for relief.

Conclusion

Here’s a “Thank you” to the U.S. Third Circuit Court of Appeals for this illumination, in its Boy Scouts opinion, on the doctrine of equitable mootness.

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